Rousseff says Brazil will try to get out of first budget deficit

BRASILIA — After presenting Brazil's first everbudget deficit, President Dilma Rousseff promised on Wednesday that her governmentwill work hard to get back in the black.

"We are being straightforward. And we are showing, clearly, that there is aproblem," she said at a news briefing.

Rousseff made her vow to get her nation's budget under control as Brazil'sCentral Bank kept its key interest rate at 14.25 per centon Wednesday, breakingwith a string of seven consecutive hikes aimed at holding back soaringinflation.

Brazil just last week acknowledged that its battered economy – the world'sseventh largest – has slipped into recession, hard-hit by plummeting oil andcommodity prices. Inflation also is high at 9.56 per cent and unemployment hasrisen to 7.5 per cent.

Rousseff's government delivered the proposed budget to Congress on Mondaypredicting a primary deficit amounting to 0.5 per cent of GDP, or 30.5 billionreais (US$8.4 billion).

This was the first time a Brazilian government has unveiled a plan thatwould mean government spending outstrips revenue.

A primary budget reflects the government's ability to manage savings anddebt. The worry for Brazil now is that its debt load will lead to a loss of itsinvestment-grade credit rating, which would be a serious blow to the economy.

"We want to meet the goal that we set," Rousseff told reporters.

"So we aregoing to get that deficit down."

Tough outlook

The 14.25 per cent interest rate is already one of the highest in bigeconomies.

Analysts believe the high interest rate will gradually bring down pricerises, but that a new hike could be risky.

The real has lost more than a quarter of its value against the US dollarthis year and there are fears for Brazil's investment grade credit rating afterthe government on Monday presented a 2016 budget that for the first timeprojects operating in the red.

Amid the tough economic climate, inflation also is high at 9.56 per cent andunemployment has risen to 7.5 per cent. — AFP